Analysis of UK Land Registration Act 2002: Registered Land & Third Party Rights - Prof. le, Lecture notes of Law

Download Analysis of UK Land Registration Act 2002: Registered Land & Third Party Rights - Prof. le and more Lecture notes Law in PDF only on Docsity! PROPERTY LAW LECTURE: WEEK 6 - 9 READING MATERIAL: SUBJECT GUIDE: CHAPTER 3 MARTIN DIXON: CHAPTER 2 REGISTERED LAND In the previous chapter we examined the principles underlying the 1925 legislation and in particular the reforms designed to simplify unregistered conveyancing. However, the unregistered system is becoming much less important now that registration of title has become compulsory on dispositions throughout England and Wales. This system is contained in the Land Registration Acts, supplemented by the Land Registration Rules. The Land Registration Act 1925 (LRA 1925) was enacted to simplify conveyancing. It introduced a system of title registration so that all information pertaining to land would be available as public record on a register at the HM land registry. The purpose of the system was to reduce the need for the purchaser to make excessive enquiries and inspections of land, and to protect any third party rights which were entered on the register. The provisions of the act were not able to achieve this result which was intended, or at least not reach it as quickly as was hoped. A re-engineering of the system was therefore required to accelerate the process of registration of land and to introduce further transparency as far as third party rights were concerned. With this end in view, the Land Registration Act 2002 (LRA 2002) was enacted and became law on 13th October 2003. It is not retrospective and does not affect dispositions that were made before the enactment date. Although the old act is completely repealed and replaced, the new act is careful to maintain the continuity of the registered title system. In other words, it is not a matter of abolishing one system and replacing it with another, but rather of continuing and improving the existing system. The primary aim of the 2002 act therefore remains the same as its predecessor i.e. to ensure the quick, efficient and inexpensive transfer of estates and interests in land while ensuring that third party rights in land are properly protected. The registered land system is often described as being based on three principles: THE MIRROR PRINCIPLE THE CURTAIN PRINCIPLE THE INSURANCE PRINCIPLE THE MIRROR PRINCIPLE: This means that the register is intended to reflect accurately the totality of estates and interests that exist with a title. Purchasers are not concerned with the past history of the title, nor are they required to carry out the sort of inquiries and inspections that may be expected of the purchaser of unregistered land; the doctrine of notice has no application. THE CURTAIN PRINCIPLE: This means that trust interests are kept off the register of title in order to simplify the transfer of the legal estate. Once the requirement of registration of the title is triggered, the purchaser must complete registration within 60 days. If he fails to do so, the legal title will revert back to the vendor and the purchaser will be left with merely the equitable estate. SAINSBURY’S SUPERMARKETS V OLYMPIA HOMES V sold his unregistered land to H. The sale of the unregistered land triggered the requirement of registration of title. H failed to complete his application for first registration. Thus, after the lapse of 60 days, the legal title reverted back to V. H was thus left with the equitable estate. H subsequently granted an option to purchase to S which S failed to register as a class C(iv) charge. H then sold the property to O, who acquired only an equitable interest at the time of sale. This is because H could only give what he had, and he only had an equitable interest. V H O S O was able to apply for first registration and became the registered freeholder. The LRA 2002 allows for registration of land by the applicant even if he has acquired an equitable title from his vendor. Here, the legal interest will be seen as being transferred to O directly from the original vendor, V, who sold to H. V H O S ENFORCEABILITY OF THIRD PARTY RIGHTS The main issue that needs to be addressed with reference to registered land is the position of a purchaser of land as against any third party rights that existed on the land before the land was bought. For example, suppose that A is the owner of registered land and he gives a leasehold estate to B and an easement to his neighbour C. A then sells the land to P. P now wants to evict the tenant and stop his neighbour from exercising the easement. B and C get entangled in a dispute with P because their rights are proprietary and capable of surviving a transfer of title. But whether they will actually be binding on P will depend on the rules of registered land, as stated in the Land Registration Act 2002 (LRA 2002), the Law of Property Act 1925 (LPA 1925) and the common law. In registered land, third party rights are divided into 4 categories. Whether P is bound by any third-party rights will depend on which category the third party right falls under. The matter will be governed by the rule of law applicable to that category. SUBSTANTIVELY REGISTRABLE RIGHTS PROTECTABLE EQUITABLE RIGHTS OVERREACHABLE RIGHTS INTERESTS THAT OVERRIDE SUBSTANTIVELY REGISTRABLE RIGHTS Estates, charges and interests that are made by deed are mostly substantively registrable. This means that unless these rights are registered, they will not be considered legal even though they are made by deed. The list of rights that are substantively registrable are contained in s 27 LRA 2002 and include the following: 1. Freehold Estates 2. Legal Leasehold estates of more than 7 years, leases that are to take effect more than 3 months after the date of grant & leases in which the right to possession is discontinuous (s 27(2)(b) LRA 2002) 3. Legal Express Easements and profits a prendre 4. Legal Mortgages 2. LEASEHOLD ESTATE There are three kinds of legal leasehold estates that are substantively registrable: (i) Legal Leasehold estates of more than 7 years. This includes any legal lease in which the duration of the lease is more than 7 years. (ii) Legal Leases that are to take effect more than 3 months after the date of grant. This is a lease that is registrable regardless of the duration of the lease. For example, A grants B, by deed, a lease of 5 years. This grant is made on 10th November 2020, but the lease will actually start on 10th March 2021. Even though the duration of the lease is only 5 years, this lease would be considered substantively registrable. (iii) Legal Leases in which the right to possession is discontinuous. This is a lease whereby the right of possession of the property is interrupted. For example, A grants B a lease to occupy A’s summer house in Brighton for 5 years. However, the lease gives B the right to occupy the summer house only for the months on June, July and August. Even though the duration of the lease is only 5 years, this lease would be considered substantively registrable. EFFECT OF REGISTRATION B/W ORIGINAL PARTIES S 7 LRA 2002 SAINSBURY’S SUPERMARKET V OLYMPIA HOMES If any of the registrable estates, interests or charges are not registered they take effect only in equity. This means that rights that are substantively registrable are not legal without registration, despite the fact that they are made on deed. EFFECT OF REGISTRATION AGAINST PURCHASERS S 29 LRA 2002 A purchaser of registered land takes free of every encumbrance except for a registered interest or an overriding interest. This means that he is bound by all registered interests and all overriding interests. In turn, he is not bound by any non-registered interests. This is known as the special priority rule. A purchaser is any person giving valuable consideration. S 132 LRA 2002 MIDLAND BANK V GREEN Nominal consideration and marriage consideration do not constitute valuable consideration for purposes of this provision. EFFECT OF REGISTRATION AGAINST NON-PURCHASERS S 28 LRA 2002 HALIFAX V POPECK If the transferee of registered land is not a purchaser, perhaps because he has received a gift of the property or is a squatter who has acquired title through adverse possession, or he has given marriage consideration or he has given nominal consideration, he takes the land subject to all prior property rights, irrespective of whether they have been adequately registered/protected or whether they qualify as overriding or not. This is known as the basic priority rule i.e. the proprietary right made first in time prevails. There are two kinds of interest that can be protected under this category, commercial equitable interests and private equitable interests, which are in turn protected by two different types of entry on the register, a notice or a restriction. PROTECTABLE EQUITABLE RIGHTS COMMERCIAL RIGHTS NOTICE PRIVATE RIGHTS RESTRICTION NOTICE A notice is a mechanism by which commercial equitable interests are nailed to the land to ensure they survive subsequent dispositions of the registered land. (s.32 LRA 2002) S 32(1) LRA 2002 defines a notice as ‘an entry in the register in respect of the burden of an interest affecting a registered estate’. Interests that are validly created and are not registrable as legal estates, charges and interests and are not overriding are subject to protection against purchasers by entry of a notice on the register. S 33 LRA 2002 lists interests which may not be protected by notice. They include: 1) a beneficiaries interest behind a trust, 2) a lease of up to 3 years, 3) a restrictive covenant between lessor and lesee. EFFECT OF REGISTRATION AGAINST PURCHASERS S 29 LRA 2002 A purchaser of registered land takes free of every encumbrance except for a registered interest or an overriding interest. This means that he is bound by all registered interests and all overriding interests. In turn, he is not bound by any non-registered interests. This is known as the special priority rule. A purchaser is any person giving valuable consideration. S 132 LRA 2002 MIDLAND BANK V GREEN Nominal consideration and marriage consideration do not constitute valuable consideration for purposes of this provision. EFFECT OF REGISTRATION AGAINST NON-PURCHASERS S 28 LRA 2002 HALIFAX V POPECK If the transferee of registered land is not a purchaser, perhaps because he has received a gift of the property or is a squatter who has acquired title through adverse possession, or he has given marriage consideration or he has given nominal consideration, he takes the land subject to all prior property rights, irrespective of whether they have been adequately registered/protected or whether they qualify as overriding or not. This is known as the basic priority rule i.e. the proprietary right made first in time prevails RESTRICTION A restriction provides a means to limit a registered proprietor’s ability to deal with the land and is used to ensure that family or private equitable interests move from the land to the proceeds of sale. (s.40 LRA 2002) S 41(1) LRA 2002 defines a restriction as ‘an entry in the register regulating the circumstances in which a disposition of a registered estate…’ may take place. Thus, family equitable interests cannot be protected by a notice and are therefore not capable of the same form of protection as commercial equitable interests. Instead, the beneficiary may enter a restriction requiring any purchaser to comply with the rules of overreaching. Thus, although a restriction does not protect family equitable interests by nailing the interest to the land and binding subsequent purchasers, as a notice does, it ensures that the family interest is safely transferred to the cash arising from the sale. OVERREACHABLE RIGHTS A beneficiary’s interest is overreachable in registered land in the same way that it is overreachable in unregistered land. This is because the law intends for all beneficial interests to be removed from the land upon a sale to the purchaser. In order to remove a beneficiary’s interest from the land, the purchaser can comply with the process known as overreaching. In registered land, overreaching can take place either because a restriction was entered requiring it, or because the purchaser complied with its requirements anyway. A purchaser can remove or overreach a beneficiary’s interest by complying with the procedure laid out in s 2 of LPA 1925. This provides that the equitable interests of a beneficiary can be removed or overreached from the land if the purchaser pays the capital money arising out of the sale to two trustees. Capital money is defined by s 27 LPA 1925 as the entire sum due. Once the purchaser has removed or overreached the beneficiary’s interest from the land, the purchaser takes free of the beneficiary’s interest. Meaning that the beneficiary’s interest is not enforceable against the purchaser or in other words the purchaser is not bound by the beneficiary’s interest. The requirement of two trustees under s 2 LPA 1925 means that if capital money is not paid, or if it is paid to only one trustee, the beneficial interest is not removed or overreached and remains on the land. Where the beneficiary’s interest remains on land, there is the possibility of a dispute with the purchaser of land. S 2 LPA 1925 does not disclose how to resolve such a matter. INTERESTS THAT OVERRIDE The LRA 1925 recognized certain rights on land as capable of binding purchasers or transferees of land despite not being entered on the register. They were known as overriding interests and were contained in s 70(1) of the LRA 1925. Much of the criticism of the operation of the 1925 act was directed at the existence of these overriding interests. There were concerns about the potential for a purchaser to be bound by undiscoverable overriding interests and the fact that the very existence of the category distorted the mirror principle. The criticisms prompted a modification of the law and interests that override are now contained in Schedules 1 and 3 of the LRA 2002. In seeking to address the main criticism against such interests, the LRA 2002 minimizes the impact of such overriding rights by employing a number of strategies. First, overriding interests operate in different ways depending on whether it is a first registration of land (to which schedule 1 of the Act applies) or whether it is a transfer of an already registered estate (to which schedule 3 of the Act applies). Schedule 1 is more extensive and allows most rights to be overriding. Schedule 3 on the other hand is more constrictive and only allows truly discoverable rights to enjoy an overriding status. Although the provisions are not identical, Schedule 3 of the LRA 2002 echoes many of the concepts found in s 70(1) of the LRA 1925. The cases decided under the 1925 Act can thus be assumed to have survived the new act unless contrary to the new provisions. The interest that override a conveyance of registered land are contained in schedule 3 of the LRA 2002. PARA 1 LEGAL LEASES OF 7 YEARS OR LESS SCHEDULE 3 PARA 2 INTEREST OF EVERY PERSON IN ACTUAL OCCUPATION OF LAND PARA 3 LEGAL IMPLIED EASEMENTS SCHEDULE 3, PARA1 LRA 2002 Legal leases of 7 years or less are overriding interests. This means that such a lease will be binding on the purchaser or transferee of land (s 28, 29 LRA 2002). A lease is legal if it is made by deed. Moreover, all leases of up to 3 years are legal by operation of law (s 54(2) LPA 1925). Legal leases of 7 years or less that are discontinuous or take effect more than 3 months after the date of grant are registrable, not overriding (s 27(2)(b) LRA 2002). Leases which took effect as overriding interests before the act (meaning legal leases which were 21 years or less) are not affected by schedule 3 para1 and remain overriding under the new regime. SCHEDULE 3, PARA 2 LRA 2002 The interest of every person in actual occupation at the time of sale is overriding if at the time of sale, either the interest was known to the purchaser or the occupation was obvious to him on a reasonably careful inspection of land, except where the interest holder waived his right or where enquiry was made and the interest holder failed to disclose the right. Many of the cases to be considered here are decided under the provisions of s 70(1)(g) of LRA 1925, the predecessor to schedule 3 para 2. In LINK LENDING V BUSTARD, MUMMARY LJ emphasized that the ‘construction of the earlier equivalent provisions by the House of Lords is binding on this court’. It is clear then that the judicial interpretation of the old provisions would continue to have authority unless otherwise repealed. GENERAL FORMULA IN REGISTERED LAND RIGHT + REGISTRATION = BINDING ON THE PURCHASER THE FORMULA UNDER SCHEDULE 3 PARA 2 RIGHT + ACTUAL OCCUPATION = BINDING ON THE PURCHASER In order to assert an overriding interest against the purchaser of land, the interest holder (henceforth referred to as the claimant) must establish the following: 1) The existence of an INTEREST on the land on which the conveyance to P has taken place. STRAND SECURITIES V CASWELL LLOYDS BANK V ROSSETT The claimant must show a proprietary right or interest on land. He must also show that the right existed at the time of the sale/disposition to the purchaser. 2) The claimant must show that he was in ACTUAL OCCUPATION of the land on which the conveyance to P has taken place. TIMING OF OCCUPATION ILLUSTRATION OF FACTS WILLIAM AND GLYNN BANK V BOLAND HELD A beneficial interest in registered land may be overreached by a purchaser of the estate of a purchaser of a mortgage charge. Where the right is not overreached, the claimant (Mrs Boland) may assert that the right is overriding. The wife’s beneficial interest was overriding by virtue of her actual occupation of the matrimonial home. The bank’s action for possession was therefore unsuccessful. LORD WILBERFORCE defined actual occupation as - “ordinary words of plain English, and should…be interpreted as such.”. He stated that “it is the fact of occupation that matters” and ‘what is required is some physical presence on land’. The factual occupation may be due to the very proprietary interest that is being claimed or it may be through a mere licence on land unrelated to the proprietary interest being claimed as overriding. TIMING OF OCCUPATION ABBEY NATIONAL BUILDING SOCIETY V CANN FACTS The legal owner of a newly purchased property was Mr A and the equitable owner was Mrs B. The legal owner took out a mortgage. On the day the mortgage charge was created, the equitable owner had not yet moved into the property. She started moving into the property just before the purchaser registered the mortgage charge at the registry. Mr A then defaulted on the mortgage payments and the bank sought possession of the property. Mrs B claimed that her beneficial right was binding and enforceable against the bank as an overriding interest. ABBEY NATIONAL BUILDING SOCIETY V CANN ILLUSTRATION OF FACTS MR A LEGAL OWNER MRS B EQUITABLE OWNER PURCHASER OF A MORTGAGE CHARGE DISPUTE B/W MRS B & THE PURCHASER IS PERSONAL PHYSICAL PRESENCE ON LAND NECESSARY? MALORY ENTERPRISES V CHESHIRE HOMES If land is uninhabitable, residence is not required, but there must be some physical presence, with some degree of permanence and continuity. In Malory, the claimants were asserting an overriding interest thru actual occupation of a derelict block of flats. The claimant company had maintained fences around the land over which the overriding interest was being claimed and had taken other measures to exclude trespassers such as keeping the property locked and had stored goods on the property. The court held that this amounted to actual occupation. Thus, actual personal physical presence may not be required if the nature of the property does not allow occupation. CAN ACTUAL OCCUPATION BE ESTABLISHED THRU AN AGENT? STRAND SECURITIES V CASWELL In Caswell, the claimant had a lease on property belonging to A. The claimant asserted that his lease was overriding on the purchaser of land due to his actual occupation. However, the claimant was not in actual occupation of the property. Instead, his step daughter was occupying the property with his permission (but not having been invited by him). The court held that actual occupation can be established thru an agent. However, this will be the case only if the person acting as an agent has been duly appointed to act on behalf of the claimant. The step daughter could not be an agent for purposes of actual occupation. Had she occupied the property at his request or in order to take care of it for him, he might have been considered to be in actual occupation of the property sufficient to establish an overriding interest against the new owner of land. DOES OCCUPATION HAVE TO CONTINUOUS? CHOKAR V CHOKAR FACTS Mr and Mrs Chokar both owned their matriomonial home. Mr Chokar was the sole registered proprietor and Mrs Chokar was the equitable owner. The were both living in the home. Their marriage fell apart and Mr Chokar sold the property at a time when Mrs Chokar was in the hospital for two weeks as a result of complications during child birth. Mrs Chokar then returned and claimed an overriding interest on the property against the purchaser. The question for the courts was whether Mrs Chokar’s temporary absence ended her actual occupation of the property. STOCKHOLM FINANCE LTD V GARDEN HOLDINGS Where there is temporary absence, actual occupation does not cease to exist unless there comes a point at which a person’s absence is “so prolonged that the notion of his being in actual occupation…becomes insupportable.” The claimant was a beneficiary or equitable owner of the property in the present case. Whereas she had once used the property regularly, she was not in occupation of the property for one year prior to the conveyance to the purchaser. There was also no indication during that period that the claimant would return. The court felt that any actual occupation that had once been established had ended with such an absence. The claimant’s interest was not overriding on the purchaser of land. LINK LENDING V BUSTARD FACTS Mrs. B, the owner of a large property, suffered a severe psychiatric condition which meant that she spent periods of her life away from home in hospital. In 2004, she transferred the legal title of the property to someone else. The transfer of the legal title was made under undue influence and so the new legal owner was a mere trustee and the actual beneficial equitable ownership remained with Mrs B. After the transfer of the legal title, Mrs B continued to live there although she spent large times at the hospital. In 2007, she was detained at a residential care home. In 2008, the new proprietor mortgaged the house to Link Lending and was unable to pay back the loan. Link Lending thus attempted to repossess the property. The issue for the courts was whether Mrs B had an overriding interest against the bank thru her actual occupation of the property. LINK LENDING V BUSTARD ILLUSTRATION OF FACTS MR X LEGAL OWNER MRS BUSTARD EQUITABLE OWNER PURCHASER (OF A MORTGAGE CHARGE) DISPUTE B/W MRS BUSTARD & THE PURCHASER CAN MERE USE OF LAND AMOUNT TO ACTUAL OCCUPATION? •CHAUDHARY V YAVUZ: an easement cannot connote the requisite occupation required for the provision as it is a mere use of land as opposed to a permanent and continuous occupation of it. •EPPS V ESSO PETROLEUM: an easement to park a car on a strip of land on some occasions could not qualify as actual occupation of the premises. •MONCRIEFF V JAMIESON: LORD NEUBERGER’S expressions in the case suggest that easements of storage are capable of amounting to actual occupation for purposes of schedule 3 para 2. WHAT IS THE EXTENT OF OCCUPATION REQUIRED? The legal extent of the interest that overrides is to be co-terminus with the extent of the actual occupation. This is a deliberate reversal of FERRISHURST V WALLCITE decided under s 70(1)(g). In Wallcite, the claimant was a tenant of a part of A’s property. In addition to the lease, the tenant had an option to purchase the entire property, including the parts that he was not occupying as a tenant. A then sold the property to a purchaser and the tenant asserted that his option to purchase was binding on the purchaser of the property as an overriding interest. The court held that since the tenant was in occupation of some part of the property, that was sufficient to establish occupation of the entire property in question. This is no longer the law under schedule 3 para 2. 3. The claimant must show that EITHER his OCCUPATION WAS OBVIOUS on a reasonably careful inspection of land OR the INTEREST WAS ACTUALLY KNOWN to the purchaser at the time of purchase. 4. The claimant would fail to show an overriding interest IF ENQUIRY WAS MADE AND THE CLAIMANT FAILED TO DISCLOSE HIS INTEREST. •HODGSON V MARKS: where the purchaser makes an enquiry from the claimant as to the existence of any overriding interest, and the claimant hides his interest from the purchaser, the claimant cannot later assert an overriding status. It must be noted that the active concealment must come from the claimant. If the claimant is innocent and the fraud or concealment is exercised by the owner/vendor or any other person, then the overriding status is not lost. •BEGUM V ISSA: there can be no duty of disclosure if the circumstances do not give rise to the expectation of disclosure. Where the claimant was asked about the existence of any proprietary rights over an Eid party, her evasion of the query did not constitute non-disclosure or active concealment. 5. The claimant’s claim would fail if there were any signs of WAIVER from him.